Bankruptcy Car Loans

There are two primary types of personal bankruptcies, Chapter 7 and Chapter 13. Although it is possible to get a car loan in either situation it is much easier to qualify for a loan after a chapter 7 bankruptcy has been fully discharged.

The reason auto financing is easier to obtain after a discharged chapter 7 is because people are in a much better position financially. In this instance, a person’s debt obligations are completely discharged or forgiven, meaning they are no longer obligated to pay for any past debts thereby making it easier to afford a new car loan payment.

With a chapter 13 bankruptcy, a person’s overall debt is renegotiated to a lower amount and scheduled payments are made over say a three or five year term. Any new debt incurred during this period such as an auto loan not only adds additional strain to the monthly payments, but must also be approved by a trustee adding an additional layer of red tape to the approval process.

The truth about after bankruptcy auto loans

This information is not provided to offer any financial or legal advice – just the facts as it relates to the way auto finance companies underwrite auto loans for people with a BK. From a moral perspective, one would think that people who pay their bills should be rewarded for doing so, as in the case of chapter 13 bankruptcies, but that’s simply not how it works.

The truth is, not only is it easier to get approved for a car loan after a discharged chapter 7 bankruptcy, there are even more auto finance companies willing to lend money to people that fall into this category. In fact, there are some lenders that make this credit criteria one of their core lending niches.

How to buy a car with a Chapter 13 Bankruptcy

If you’re currently in a chapter 13 bankruptcy, a buy here pay here car dealer may be your best option for an auto loan. In this scenario, the auto dealer underwrites and extends the credit and is not limited to the underwriting criteria of an independent, third party auto lender.

Buy here pay here or in house auto financing is not available from all car dealers. If you are currently in a chapter 13 and want to learn more about this type of car loan, click here for more information.

Bluesky Auto Finance is integrated with direct lenders that offer auto loans for people after bankruptcy as well as a network of auto dealers throughout the United States. Keep in mind however, that there are other criteria lenders consider when reviewing your application such as length of employment and monthly gross income.

If you’re currently in a chapter 13 bankruptcy, in house dealer financing may be your best option and we recommend Drive Time, a national buy here pay here organization that specializes in bad credit and after bankruptcy auto loans.